NEW YORK: The foundation that oversees US accounting rule-making on Wednesday approved creation of a new body to modify accounting standards for the nation's 28 million private companies, a move that had been opposed by a senior US lawmaker.

The action by the Financial Accounting Foundation follows years of complaints from private companies that public company accounting rules were too complex and costly.

The new body, called the Private Company Council, will decide whether exceptions or changes should be made to US Generally Accepted Accounting Principles (GAAP) for companies that are privately held. Though GAAP applies mostly to public companies, many lenders also require GAAP for private firms.

First proposed in October, the idea for the council drew criticism from Democratic Senator Carl Levin, who said it could weaken GAAP and conflict with international accounting standards. Levin chairs a Senate investigative panel that frequently tackles complex accounting issues.

"While the proposal states that its intent is not to encourage the creation of two different versions of GAAP, that is the inevitable consequence of the proposal," Levin said in a letter to the FAF in January.

"Enabling those private companies to obtain their own accounting exceptions or special rules would affect the accounting practices of the vast majority of US corporations in existence today," he wrote.

The International Accounting Standards Board, which sets international rules, has not recognized exceptions for private companies, Levin noted. Instead, it has separate standards for small and medium-sized firms.

Accountants for privately held companies have long complained that the Financial Accounting Standards Board (FASB), which is responsible for GAAP, neglects the special needs of private companies.

FASB will endorse the private company council's decisions. The original proposal had called for FASB to ratify the changes. The chair of the new council will not be a FASB member.

New rules under consideration by FASB, such as requiring companies to put more leases on their balance sheets, would hurt small businesses that lease their buildings, possibly causing them to breach terms of their loans, some accountants said.

Others said disclosures on derivatives and fair value required by GAAP are irrelevant and overly detailed for many private companies.

The American Institute of Certified Public Accountants, the main trade group for US accountants, had initially expressed concern that the council might not be independent enough, but on Wednesday came out in support of it with CEO Barry Melancon describing it as "solid steps in the right direction."